You’re ethical, right? You do thorough fact-finding with clients. You recommend only appropriate insurance or investment products. You believe in full disclosure. And since you do these things, your clients believe you are ethical. So what’s the problem?

The problem is you’re a human being. That means you’re hard wired to get comfortable when life is good. The more success you achieve, the more comfortable you’ll get. And when complacency erodes your commitment to ethics, your ethics edge will get dull. Before long, you’ll be breaking the rules, making mistakes, and getting sued.

How to avoid this? By periodically testing—and sharpening—your business practices. The ethics quiz below will get you started.

  1. Do you always protect and promote your client’s best interests, even if it’s not to your financial advantage?
  2. Are you totally honest in explaining your education and business background, including your licenses and designations?
  3. Do you always disclose the important features of your products or services, including potential risks that may affect future performance or value?
  4. Are you totally truthful about the realistic returns or future values a client can expect?
  5. Do you thoroughly probe a client’s current and future needs in order to make suitable recommendations?
  6. Do you respect client confidentiality even under third-party pressure to disclose information?
  7. Do you only use advertising and presentation materials that are completely accurate and legally compliant?
  8. Do you always provide clients with copies of required documents relating to the products or services they have purchased?
  9. Do you always refer your clients to an outside professional for expertise that is beyond your training and current license?
  10. Do you stay up to date on all industry practices, including emerging trends, new government regulations, and the latest product or service innovations?

Obviously, the correct answer is “yes” for all 10 questions. How did you do?

  • If you scored 90 to 100%, your ethics edge is ultra sharp. Your challenge: to further sharpen your ethical practices and to share them with others by becoming an industry leader.
  • If you scored 70 to 80%, your ethics edge is getting dull. Solution: Think hard about where your business and life are headed. Read trade journal articles about ethics. Recommit to high levels of integrity in every aspect of your business—and life.
  • If you scored 60% or lower, your ethics edge is rusting over. If you continue in this direction, client complaints, regulator sanctions, and errors-and-omissions lawsuits are in your future. Solution? As soon as possible, challenge yourself to get serious about ethics and adopt high-quality business practices. Write and post a new code of ethics for your firm—and pledge to live by it every day. Use our code as a guide.

The point is this: Nothing is more important than your professional integrity. Once you lose your ethics edge, you run the risk of rusting over entirely and becoming an E&O target for plaintiff’s attorneys. Trust us . . . you don’t want this to happen.

For more information on reducing your errors-and-omissions insurance liabilities, please visit our EO Headquarters at

Have you ever forgotten to do something—or did the wrong thing—and needed a way out? We’d like to believe that most financial professionals in the wrong respond by doing right. They own up to their mistakes, apologize, and try not to repeat them. But that was before the advent of the Alibi Network, an Illinois company that provides excuses for a fee.

This company sells ways to justify absences from home, work, and family events. Their “alibuys” take the form of telephone calls simulating you had a work emergency or car accident, a letter proving you attended a conference, or a ticket stub to a concert. It even provides phony corporate locations and jobs for people who want to convey a better, though false, impression.

The point of mentioning this reprehensible business (which we suspect will have no shortage of customers) is that insurance and investment professionals who fulfill their ethical obligations to their customers—who deliver on their promises and who fix their mistakes when they don’t—don’t need alibis. Today’s ethically enlightened professionals commit to doing their jobs and don’t make excuses, period.

Furthermore, they understand that excuses are a slippery slope. Once you start making them, you get sloppier, make more mistakes, and need even more excuses. It’s hard to feel good about your work and your life when you don’t take responsibility for your actions.

The solution? Get competent! The vast majority of client problems result from ignorance, sloppiness, forgetfulness, or procrastination. If you want to avoid client complaints, regulator scrutiny, and E&O insurance claims, just follow through on your promises. Here’s how:

  • Pick up the phone and communicate. The breakdown of client communication is the mother of all E&O mistakes and client lawsuits.
  • Know your products inside and out. It’s better to know a lot about a few products than to know a little about many. If you aren’t sure of a product detail, research the issue and get back to the client.
  • Stay on top of your administrative work. Don’t procrastinate. Unfinished tasks will only pile up and breed chaos. Chaos generates mistakes, lawsuits, and E&O insurance claims.
  • Hire the administrative help you need. Because if you don’t, you almost certainly will cut corners and make mistakes.
  • Eradicate excuses from your business and your life. Financial professionals who make excuses fool no one but themselves. Plus they weaken their moral fiber, along with their professional and personal relationships. And yes, they get sued more often.

Finally, when you do make a mistake, ‘fess up and make it right. Ethical insurance and investment professionals make mistakes, but fix them. Unethical ones buy excuses from the Alibi Network.

For more information on reducing your errors-and-omissions insurance liabilities, please visit our E&O Headquarters at

Making apologies is a big deal in health care, and it should be in your business, too.

Traditionally, doctors, nurses, and other providers were advised never to apologize, even when they screwed up. Reason: courts might view their apology as an admission of guilt, leading to larger malpractice insurance judgments.

However, in recent years, an opposing view has emerged—that apologies lead to quicker and less costly malpractice awards. Rather than confronting silence, patients who experience fast and informative disclosure of errors, along with apologies, are much less likely to sue, industry experts say.

According to Doug Wojcieszak, founder of, a medical-malpractice advocacy group, the ideal response to a medical error should be to:

  • Immediately inform the patient and his or her family of an error.
  • Express concern and lay out the next steps in the treatment process.
  • Notify the errors-and-omissions insurance company, risk management staff, and attorney.
  • Arrange to meet with the family and their lawyer to explain what happened and how you will rectify situation.

A majority of states now have laws excluding apologies as proof of liability, with promising results. For instance, according to the New England Journal of Medicine, annual litigation costs fell by two-thirds after the University of Michigan Health System instituted a medical-error disclosure program. Similarly, average time to resolve claims and lawsuits feel to 9.5 months, from 20.7 months, and the number of lawsuits fell by more than half, from 262 to 114.

What can insurance and investment professionals learn from the healthcare experience? That making apologies is a powerful weapon for reducing errors-and-omissions lawsuits and increasing customer satisfaction. In fact, it’s such a great technique that it shouldn’t be left just to medical professionals.

So the next time you or one of your employees makes a mistake, accept responsibility and then apologize. Here are some tips that will help you make an effective apology:

  • When to apologize? Whenever a customer has complained about an insurance policy or investment product you sold.
  • Where to apologize? Try to take online interactions offline whenever possible. An in-person apologies via meeting or phone call will always have a better result than ones offered via text or e-mail.
  • What if you harmed a customer? Then express your concern, but immediately seek advice of counsel. Ask your lawyer if the laws in your state allow you to apologize without increasing your legal liability.
  • How should you phrase your apology? Make it short, simple, and direct. Just say you regret what happened and that you are very sorry for any inconvenience the customer suffered. Then stop and assess the customer’s reaction.
  • What further explanation should you make? Assuming the customer reacts positively to your apology, briefly explain what went wrong. Putting the problem in context often reduces the intensity of a dispute. However, don’t try to deflect or minimize your responsibility for the incident. And never blame the customer, even if it was his or her fault.
  • What if the customer reacts poorly? Then apologize again and probe for why the person is still unhappy. Did you describe the incident incorrectly? Was your apology heartfelt? Did you respond quickly enough?
  • How should you make things right? Offer something of value to the customer. It doesn’t have to be worth a lot of money. But it must be relevant and meaningful. For example, if you know the client likes to read, perhaps give the person an gift certificate. Just be careful not to give cash, which might be viewed as an illegal premium rebate.
  • How do you close the apology? End by explaining any next steps to be taken to prevent future incidents. Then repeat your apology and confirm that the consumer accepts it.

Follow this process and you’ll win back your client and prevent errors-and-omissions insurance claims. That’s a win-win for all concerned.

For more information on reducing your errors-and-omissions insurance liabilities, please visit our E&O Headquarters at

In recent years, there’s been a lot of talk about America’s budget deficit and mounting debt. The great debate over our budget has us wondering about the meaning of the term “full faith and credit” . . . especially how it relates to the ethics of selling and the importance of reducing business liability today.

The term “full faith and credit” actually has a specific legal meaning. It refers to a specific clause in the U.S. Constitution that requires all states to recognize the legislative acts, public records, and judicial decisions of the other states. It was hoped this would unify the country, yet give the states proper autonomy.

Over time, though, “full faith and credit” has been used in many other contexts, including the notion that the U.S. unconditionally guarantees its financial obligations. Regardless of your political ideals, you have to wonder about the wisdom of doing anything that damages that faith. Because once a government loses public belief in its financial integrity, it’s tremendously hard to rebuild trust.

In much the same way, financial advisors have their own “full faith and credit.” Your clients agree to do business with you because they believe you are competent, will provide suitable solutions, and guarantee to be there for them when they need service. They believe that you have integrity and will do the right thing, unconditionally.

Yet anyone who reads the business media knows that financial professionals sometimes act in ways that erode that faith. Big lapses like soliciting for Ponzi or pyramid schemes. Little things like being sloppy with paperwork or failing to return phone calls. And everything in between, from selling unsuitable products and misrepresenting product features to not staying current with product trends and giving lackluster advice. With each ethical transgression, a client’s faith in an advisor’s integrity weakens. What started out being unimpeachable develops fissures over time, inevitably crumbling in disgrace. And when trust dissolves, lawsuits are never far behind.

So how to you maintain your own “full faith and credit”? Here are some steps you can take:

  1. Do everything by the book. Make sure your marketing and administrative practices are locked down tight.
  2. Do business with professionalism. Part of this depends on you knowing your stuff. The other part depends on you acting with unconditional integrity.
  3. Exceed client expectations. Be sure to set—and reset— client expectations as needed.
  4. Communicate, communicate, and communicate with your clients. And when you’re done, communicate some more.
  5. Always do what’s best for your clients. Never forget that it’s about them, not about you. In short, whatever your business, adopt the mindset of a true fiduciary. This is the ultimate strategy for reducing your business risks. Do this and hopefully you’ll never need to use your errors-and-omissions insurance policy.

For more information on reducing your errors-and-omissions insurance liabilities, please visit our E&O Headquarters at